This a great article except the part where is says property management is “a luxury will eat into cash flow.” Property management is a luxury that you should serious look at because we take care of tenants screening, collecting rent, complaints, and all the other fun stuff of having rentals. Let us manage your property for 7% management fee! That wouldn’t be eating into your cash flow as much.

Cashing in on rental property

By Jeff Wallach @Money September 2, 2011: 6:07 AM ET

(MONEY Magazine) — Most of the news lately about real estate has been dismal: Home prices are swooning, foreclosures ballooning.

There is, however, one bright spot: the rental market, where demand is up and rents are rising. That’s partly because those foreclosures have turned more than 4 million former homeowners into renters, but also because many other prospective homeowners, worried about losing their jobs or housing prices falling a lot further still, are reluctant to buy now.

As with many investments, the best time to get in is when most others are sitting on the sidelines. To figure out whether you can benefit by investing in rental property, here’s what you need to know.

THE CASE FOR BUYING NOW

Many factors make this a great time to invest. Mortgage rates are at a 40-year low, and homes in many areas are ultra-cheap. Meanwhile, demand for rentals has risen in more than 500 cities, according to recent Census data. That, in turn, has enabled landlords to charge more. Hotpads.com, a real estate research firm, reports that rents nationwide jumped 11.6% in 2010, to $1,320 a month.

You’ll need that rental income to tide you over until home prices bounce back; in fact, the typical investor today plans to hold for 10 years, according to a survey by the National Association of Realtors.

If you can hang on that long, you’ve got a good shot at solid gains, especially if you’re financing the home purchase. “Whereas leverage is dangerous when buying stocks, it can be a good long-term strategy with real estate,” notes real estate investor and Columbia University adjunct finance professor Marshall Sonenshine.

The big catch: “Can you afford to hold the property that long and not need the equity for your kid’s college fund?” says Sonenshine. Or whatever other pressing need might crop up.

You’ll also face some tough financing rules. Most banks now require a down payment of at least 20% to 25% and evidence you have enough cash to cover six months’ worth of mortgage, tax, and insurance payments.

HOW TO FIND A GOOD DEAL

Investment real estate is like produce: It’s best bought locally. “Buy something you can get to in 10 minutes,” says Seattle real estate investor Bill Snyder.

Familiarity with the neighborhood also limits nasty surprises like a noisy bar or a nearby development competing for renters.

Work with a local realtor who has experience with rentals and can help you assess how attractive a given home will be to tenants.

And while prices on multifamily dwellings haven’t dropped as much as they have on single-family homes, don’t ignore plexes: Intake from a few rents instead of just one will boost your cash flow; a single vacancy won’t hurt as much; and you could benefit from economies of scale for things like appliances and painting. But stick to buildings with four units or fewer to avoid stricter financing requirements, such as a bigger down payment and higher mortgage rates.

Once you’ve identified candidates, crunch the numbers. The goal: to make sure your rental income will at least cover your loan payments, plus a 20% cushion to handle repairs, vacancies, and property management.

To figure out what you’ll garner in rent, ask sellers for recent leases, says Snyder, and double-check their numbers by perusing sites like Rentometer and Craigslist for similar rentals in the neighborhood.

Assume your mortgage rate will be at least a half-point higher than rates on owner-occupied properties. Factor in insurance and property taxes, and bank on a 5% vacancy rate. Otherwise, “one empty month can kill you,” says Ellie Berlin, a broker with Houlihan Lawrence in Larchmont, N.Y.

KNOW WHAT YOU’RE IN FOR

Brush up on your people skills: Owning rentals also means responding to tenant complaints, like the 2 a.m. phone call about a broken toilet. Want to palm off the grunt work? You can hire a handyman (around $45 an hour) or a management company (8% to 10% of monthly income plus a half-month’s rent for filling vacancies), but the luxury will eat into cash flow.

To find your own tenants, creative ads on Craigslist are your best bet. Run credit and reference checks (National Tenant Network, at ntnonline.com, can help). And invest in small touches to make your place stand out, such as cool lighting fixtures or antique door hardware. Those will pay off when it’s time to sell too.

Investors are renting out about half of the homes they purchase instead of renovating or flipping the properties, according to a new survey.

The latest Campbell/Inside Mortgage Finance Housing Pulse Tracking Survey, which surveyed about 2,500 real estate professionals, found that investors are struggling to resell properties so they are leaning toward renting the homes out instead. The survey estimated that investors will rent out nearly 50 percent of the properties they acquired in July. In July 2010, investors would have rented out only 28 percent of their properties.

www.realtor.org

More single-family homes are becoming rentals these days.  This is no surprise because the housing inventory has experienced a tremendous increase over the past few years.  With the huge amount of foreclosures flooding every market across the country, market values have fallen and many home owners are unable to sell their homes for what they owe on it.  Some home owners are fortunate enough to be able to afford to rent out their homes when they have to relocate.  Other home owners have not been so fortunate.

Have you thought about where all of the homeowners who had to let their homes go into foreclosure, ended up?  You got it!  They are the tenants who are now renting houses in almost every neighborhood!  Home rentals have become very popular and will continue to increase in every market.  As many home owners are unable to sell their homes because of so much competition, renting is the answer to help them “stop the bleeding.”

As the mortgage industry continues to tighten their requirements on loan qualifications, less people are able to be approved for a mortgage loan.  Therefore, they will rent houses if they do not care for the apartment lifestyle.  As always, when the demand goes up the price will go up, meaning higher rental rates.  With home values going down and rent going up, the recipe is right for investors to buy investment properties!  Get out and wheel and deal and create your nest egg for the future!

Boomers Booming According to Census 2010

By Chris Hagan of  Statesman Journal

…..The new numbers also showed Oregon to be a popular destination for renters, with the third-lowest rental vacancy rate in the nation at 6.5, a nearly 11 percent drop from 2000. Salem and Marion County sat at 6.7 percent.
New York had the lowest rental vacancy rate at 5.5 with California second at 6.3 percent. The national rate was 9.2 percent.
“There hasn’t been any new construction (of new rentals),” said Shirley Layne, a certified general appraiser with Powell Valuation. “Our supply is low and our demand is high.”
Layne said that Mid-Valley builders typically wait until the apartment vacancy rate gets below 5 percent before building.
A Powell survey for Salem-Keizer found a vacancy rate of 5.88 percent in the first quarter of 2011.
Beyond the vacancy rate, Layne said the Salem area lacks land suitable for apartment buildings. “Land is pretty scarce around Salem,” Layne said. “(Builders are) looking and shopping, but they’re not going to do anything until that vacancy rate gets down.”
Coupled with that, Oregon had one of the lowest home ownership rates in the nation at 62.2 percent, seventh-lowest among states.
Jamie Martinson, a senior adviser with Sperry Van Ness Commercial Advisors, said the home ownership rate was a reflection of high home prices coupled with low wage growth in the state.
The Salem area ranks 117th nationally in the National Home Builders Association’s Housing Affordability Index, the best of the Oregon cities included in the survey.
“The combination of higher cost housing with lower wages, that’s why we rank where we rank,” Martinson said.

5 Real Estate Investing Tips

We had a meeting with some experienced investor friends last week. These were some of the people that I know had a great business sense, but got caught in the downturn of the market. Some of them lost everything: all their rental portfolios as well as their personal homes. Yet when asked if they were OK and still interested in real estate investing, they stated without hesitation – YES!

They know that real estate investing is still the best way to make long term money and true wealth. They stated that they were just going to have to do things differently in the future.

Here are some investing tips that Mark and I want to share with those of you either interested in getting into rental real estate or for the pros that just need a little refresher.

1-      You make your money when you buy the property. If you purchase the property for too much money, it is almost impossible to recoup your investment.

2-     Know your exit strategy. What do you want to do with the property? Rent it? Sell it for a profit either through wholesale or retail? The answer to this question will then help you determine your numbers and your financing strategy.

3-     If you are going to sell for a profit – know your market! We are still in a buyer’s market. Your home needs to be priced aggressively so that you can compete with the other sellers in your market.

4-     If you are going to rent it out – know your market! Use a professional property management company to work with you to determine the popular rental areas and the best rental prices. Solid Source Property Management has a team of agents that helps investors find properties in great areas to make sure that the investment is solid. Also, we provide an incentive for management when we help with the purchase.

5-     If you are going to buy a foreclosure or short sale to sell, don’t over-rehab it because you want a project. I see this over and over again. The investor takes too much time and over improves will lose money every time. You can never recover from long buy, sell & hold costs, nor will improving a property beyond what the comps will support.

Last week, I listed 15 questions to ask a professional management company before hiring them to manage your assets.  Knowing the answers to the most important questions is critical before you sign on the dotted line of the Management Agreement.  By asking these questions, you will be much better prepared to make an educated decision on finding a professional management company that you will enjoy a lasting relationship with.

Always remember that having the right management company to manage your investments is the key to your success.  Here are the remaining 15 questions to ask.  If you have any questions for me, feel free to post them!   Happy investing!

16.   Do they apply the same leasing criteria to Section 8 applicants?

17.   Do they require the tenant to pay a security deposit?

18.   Do they charge the tenant for damages caused by tenant, including Section 8 tenants?

19.   Do they allow tenants to break a lease?  If so, what are they charged?  Who gets that income?

20.   What are their marketing strategies for getting available properties leased?

21.   What is their leasing fee?

22.   What is the average number of days on market before they lease a property?

23.   How often do they check on vacancies?

24.   What software program do they use for keeping track of income & expenses?

25.   Ask to see a copy of a monthly statement that they provide to owners.

26.   When do they send statements to owners each month?

27.   When do they send out checks each month?

28.   Do they require tenants to sign a Lead-Based Paint Addendum for houses built before 1978?

29.   Ask for copies of all documents that they require tenants to sign.

30.   Get a copy of their Management Agreement and read through it or have an attorney review it.

Ever wondered how to screen a professional management company? Knowing the answers to the most important questions is critical before you sign on the dotted line of the Management Agreement.  Having the right management company to manage your investments is the key to your success.  Here are the first 15 questions to ask…check back next week for the second 15 questions!  Happy hunting!

1.      How much is their management fee?

2.      What is their mgmt fee based on? (% of rent, % of total income, or flat fee?)

3.      Do they charge a management fee when the property is vacant?

4.      Do they charge late fees and who gets the late fee income?

5.      Who handles their repairs?

6.      What home warranty company do they recommend?

7.      How long does it normally take to get repairs done?

8.      Have they performed a criminal background check on the contractor or repair personnel?

9.      Do they require their contractors or repair personnel to be licensed and bonded?

10.   Do they have a list of prices or estimates for make-ready repairs and/or turnover costs?

11.   How do they report repairs to owners? (Provide copy of invoice or detailed report?)

12.   Do they get advance approval from owner for repairs over $300?

13.   How do they handle emergency maintenance?

14.   Do they consult with the owner prior to approving tenant applications?

15.   What is their leasing criteria for approving a prospective tenant? (Get a copy of their leasing criteria)

Call today to ask these questions to your current property management company and then call us to compare.

Call 503-507-4248

Living in Salem Oregon there are plenty of Property Management companies. But you want one that will help you rent your home. Willamette Meadows Property Management can not only help you rent your home, but also help with house maintenance.

For more information about how to get started with Willamette Meadows Property Management, please contact us today.